On December 1, 2022 the Consumer Financial Protection Bureau (CFPB) announced that it had reached a proposed settlement with a Delaware-based financial services company to resolve allegations it made false representations to consumers in violation of the Consumer Financial Protection Act (CFPA).
In the underlying complaint filed in the U.S. District Court for the Southern District of New York, the CFPB alleged that the company held itself out as a traditional commercial bank and falsely told depositors that their money would be held in secure, insured CD accounts that had previously paid abnormally high interest rates of between 5-6.25%. In reality, the CFPB alleges that the money was kept in volatile securities or securities-backed investments. The CFPB further alleges the company did not have factual support for its representations concerning past interest rates, and in fact, did not even offer services during the time period it had represented that its accounts paid interest rates up to 6.25%
The proposed settlement, if approved by the court, would require the company to return all of the money to the over 400 individuals that deposited into the company’s accounts with the advertised rates of return, totaling approximately $19 million. The settlement would also require the company to halt any deposit taking activities and pay a civil penalty to the CFPB of over $390,000.
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